Companies entering public markets face growing pressure to strengthen financial controls ahead of listing

Companies preparing to go public in 2026 may be facing a hidden valuation risk long before their IPO roadshow begins.

According to recent market observations and regulatory trends, weaknesses in internal controls over financial reporting can lead to meaningful reductions in valuation, delays in IPO timelines, and increased audit scrutiny. These issues often stem from the gap between early-stage financial processes and the higher standards required for public companies.

A “Credibility Discount” Investors Notice

Investors closely evaluate the reliability of a company’s financial reporting. When internal control weaknesses are disclosed, particularly in IPO filings, it can signal higher risk.

Recent data shows that half of first-time public companies report at least one material weakness in internal controls. These weaknesses are commonly tied to financial close processes, lack of segregation of duties, and gaps in IT systems.

The result is often a “credibility discount,” in which investors adjust their pricing due to concerns about financial accuracy, scalability, and governance.

Why Control Gaps Happen

Many high-growth companies build their finance functions for speed rather than compliance. While this approach supports early growth, it can create challenges as companies prepare for public markets.

Common gaps include:

• Undersized accounting teams or a lack of public company experience
• Informal or undocumented financial processes
• Heavy reliance on spreadsheets instead of controlled systems
• Limited IT controls and access management
• Governance structures that lag behind company growth

As regulatory expectations increase, these gaps become more visible during audits and investor due diligence.

Regulatory Expectations Continue to Rise

The bar for IPO readiness is higher than ever.

Recent updates from the Public Company Accounting Oversight Board (PCAOB) and the Securities and Exchange Commission (SEC) have increased expectations around audit evidence, cybersecurity disclosures, and financial reporting accuracy.

Companies are also facing greater scrutiny around data reliability, management review controls, and the ability to support financial statements with clear, documented evidence.

What “IPO-Ready” Looks Like

To meet these expectations, companies must evolve from startup-style accounting to a more structured and controlled environment.

This includes:

• Documented and testable financial controls
• Structured close processes with defined review steps
• Strong IT general controls and access management
• Reliable data systems that support reporting
• Clear governance and oversight from leadership and the board

Organizations that invest early in these areas are better positioned to avoid delays, reduce audit issues, and maintain investor confidence.

A Strategic Opportunity, Not Just a Compliance Exercise

While strengthening internal controls is often viewed as a compliance requirement, it also presents a strategic advantage.

Companies with strong financial controls can move through the IPO process more efficiently, reduce uncertainty for investors, and demonstrate their ability to operate at scale.

About SingerLewak

SingerLewak’s IPO, SOX, Risk, and Internal Audit Services team works with companies at all stages of growth to prepare for public markets. From control design and SOX readiness to audit preparation and governance advisory, the firm helps organizations build scalable, investor-ready financial infrastructures.

Businesses considering an IPO or evaluating their current readiness are encouraged to connect with SingerLewak to assess control maturity and identify opportunities to strengthen their position.